the book is called this time is different and they said that any time sovereign debt gets up to ninety percent of g.d.p. it causes basically economic disaster do low growth rate well there's a there's a lot of different things you can say in response to this you know my primary response to this would be that you've got some academics guys who are not in the market who don't have real jobs who are poring over data who are looking at textbooks and come up with a theory that they have a predisposition toward proving and they're willing to overlook actual facts to get to the goal line of proving a theory that turns out that the facts cited were wrong the conclusions were wrong the title of the book is wrong and says this time is different no it's exactly the same all over again a bunch of bureaucratic academic knuckleheads whether it's these two it is or ben

bernanke the making academic assumptions that do not jive with the marketplace yeah and any investor knows that as soon as you hear those words this time is different you always know it's not so the fact that all these policymakers around the world were duped by even the title so let's go into what actually happened what was the flaw in an article called how much unemployment was caused by reinhart and rogoff arithmetic mistake so university of massachusetts economist thomas herndon michael ash and robert pollan refer to us have. looked at the data and it turns out that the initial results were driven by simple computational and transcription errors the most important of these errors was excluding four years of growth data from new zealand in which it was above the ninety percent debt to g.d.p. threshold when these four years are added in the average growth rate in new zealand for its high debt years was two point six percent compared to negative seven point

six percent that reinhart and rogoff had entered in their calculation so if we restore those years in fact there's very little correlation. to lead to their causation which they say is the high debt it's inconclusive you don't know whether the high debt causes unemployment or whether the unemployment causes high debt what we do know is that policymakers and bureaucrats who follow this prescription and imposed austerity in countries like greece have caused massive unemployment and a massive plunging in g.d.p. and a massive increase in debt because they don't want to see the markets simply do what the market does which is to allocate resources and goods and services in a way that's better than having academics and bureaucrats and central planners who fail time and time again you know there was real imperishable evidence all these austerity measures were imposed on greece and ireland and spain and it's spiraling

worse the debt is exploding unemployment rates are exploding. molotov cocktails are exploding and they kept on saying no but this paper this book by wrote often reinhart says this time is different right and when presented with the evidence all we need now is for them to say this lady's not for turning remember margaret thatcher when shown the evidence that her policies were destroying the u.k. said this lady is not for turning and as a result unemployment went up the economy showing now the course you had north sea oil which hid the fact that our policies were horrendous and now you've got a post that your period where the in adequate series of her policies are becoming manifest and we're going to see higher inflation and wage collapse so this is what jobs are joe's or is born of his ilk so this guy and his work reason for austerity in the u.k. are they going to now admit that their policies are based on a completely faulty corrupt data or are they going to stand up in parliament say

i'm george osborne with is going to worsen fall season which skirt and say this latest not for turning based on his crowing it festers funeral i'd say he's going to do the dressed up like satcher and do the factional impression which is going to hurt the british people i'm going to go over some of the quotes from heads of states and unelected bureaucrats who have basically imposed policies on tax payers and citizens around the world based on this paper all the rand of the european commission says it is widely acknowledged based on serious research that when public debt levels rise above ninety percent they tend to have a negative economic dynamism which translates into low growth for many years and timothy geitner said it's an excellent study although in some ways understates the risks so here are guys setting economic policy they have a whole team of hundreds of economists that work at the treasury why did he ever even think to look at the data and test it himself because they wanted this outcome

anyway this is they fit the facts around what they wanted. ideologically right well there's a double tragedy at play here because of course people like paul krugman and the money printers will say you see steroids bad we need to print lots of money but of course they have an academic agenda as well they're not paul krugman doesn't have a real job the summer had a real job he doesn't having experience in the market or finance he has an ideological objective as well he'll use this to make errors on the other side of the debate by over stimulating by flooding the economy with money and has even milton friedman said there's no connection between monetary policy deployment but of course with a site that even though there are vets there are god milton friedman no so again neither krugman nor these to jerk off respect the market they should because the market is better than academics making arguments based on their own theories and then faulty data we have interviewed professor steve several times about this over

the past few years and he said this americans and many policymakers have this obsession with the government debt number is when it is private debt numbers that matter the most this is what according to steve kean's models suggest so i tweeted him and i asked how many times have you said on kaiser report that it is private debt not government debt that matters hash tag reinhart wrote off he responded yep stacy and i have a causal argument supported by correlation rather than dependent on it and i don't use excel well the private debt issue of course that would mean rolling back the activities of the private banks who are in the business of accumulating in this country for example in the u.k. the private banks have a six times the g.d.p. of debt on their balance sheet many times more than the national debt but to clue that in your calculations would mean admitting that you've got a rogue central you've got a rogue banking sector that's completely out of control and then of course

everyone's bonuses will dry up so that's like going to happen either all the policy because of this time is different they've cleaned all the policy has been about cutting social services cutting welfare benefits cutting health care all these things education. where nobody cares about the private debt of the actual consumer so you have the explosion of student loan debt in america which is now is non-recourse you can't walk away from that like what happened with the the housing bubble in america you have the explosion of student debt here in the u.k. private debt consumer debt credit card debt is exploding and nobody is doing anything to stop that in fact they're encouraging it in order to say they are trying to save the sovereign debt numbers to get those to go lower but if you want central planners and academics to run your economy then make a simple rule that the private debt should never be more than twenty percent of the public debt so therefore your banking sector or whatever they can relate in debt

the public sector should be able to invest themselves five times greater the risk you know should be opposite of what it is today so you've got the public sector of who's out there in debt in themselves but at the same time creating jobs wages would go up consumerism would increase and you wouldn't have a banking sector that's gone rogue that's dragging the global economy into the ditch now if you want to impose a rule if you want to be bureaucratic impose that rule but impose no rule but don't let the private debts get to five or six times public debt that's the worst of both possible worlds in the u.k. you've had rising these shock bad unemployment numbers and the i.m.f. has told them to back off on austerity but there has been one number that has always been telling the truth for the last ten years since two thousand and two two thousand and three and that's the price of gold we know the price of gold of course had a huge crash one of the worst ever from friday to monday and on through the week central

banks find stimulus glitter and gold slump the slumping gold may hand activist central bankers more reasons to pursue the easy monetary policy that helped to drive up the metals price and the first place central banks can be opportunistic and proceed with quantitative easing now the gold market is. rendering with regards to his hyper inflation fears said edward carey denny president and chief investment strategist at your identity research in new york not once again you've got academics looking through the wrong end of the telescope and drawing completely ridiculous conclusions clearly the price of gold pulled back because of all the paper that's been created as part of quantitative easing the fact that they successfully flooded the market with naked short sellers that is a counterfeit contracts and drop the price down they're using as justification to flood the market with more naked short sales and to print more money there's not going to be any retraction from quantitative easing price of gold and silver is now at a point where the globe is buying hand over fist in a frenzy and averse still had

a good ten thousand dollars an ounce but here again you know relating it to what happened to reinhart and rogoff they just ignore the data that doesn't support their ideology and here the situation is that you know they believe that quantitative easing should work and it was their irrational price fear in gold which was it was just the price was the wrong thing you know it wasn't there it's like the story of the kid who shoots his parents and goes the judge and says your honor i made leniency because i'm an orphan here you've got global traders killing the price of gold and going to the world banking establishment saying we need more bailouts because the price of gold just went down because we just shot it in the head so they're always going to get more bailouts and the price of gold will pull back on its way to ten thousand dollars an ounce and correlation and causation again you know that they see that the price of gold is correlated to their policies the insanity of their policies so they think if they could just get gold to go down that means their policies are no longer crazy it's if you're saying that the person

gold is correlated your policies and you're also saying that the world is on a gold standard there was a lot of gold standard today that's the biggest joke of all we're on the gold standard these guys are making policies based on the price of gold what is that you think that means we're like you said it's just a trick it's just tradition we don't respect. he's lying through his teeth all right stacy thanks for being on the kaiser report thank you all right states over the second half much more.

we are facing a lot of problems. because no one thought to drink no good school. when you feel south park. what's not enough wealth is a law in the local needs you want a community l.n.g. motion will be used. you've just done for. i was fired i must fight. fight. fight all right.

welcome back to the kaiser report imax guys are time now to go to florida and thought what the father of reaganomics dr paul craig roberts a former official in ronald reagan's to. department and author of a new e-book the failure of laws a fair capitalism economic desolation of the west dr roberts welcome back to the gaza report thank you max all right dr robert gold fell violently and price despite it being in backwardation a sign that physical markets are tight your thoughts on what has happened in gold recently well i think that the fed is driving gold down to protect its. quota to be easy policy because when you create a thousand billion new dollars each year but the demand for dollars is not growing in fact more and more countries or no longer using it to settle their international

payments you get a huge difference between supply and demand so the fair the fed's quantitative easing threatens the dollar exchange rate and a strong gold price is an indication that the dollars exchange rate is untenable so to to protect the ball strong the effects of quantitative easing the fear periodic lee taxes by losing its bullion barracks in the paper go more massive shorts the logic hair seems like something out of a dr seuss book because the federal reserve recently said that because the price of gold is down they can then ease and print more money and they can introduce more quantitative easing however we know that the price of gold went down recently because the fed and its cohorts on wall street shatter the price with naked short

sells or fed printing of more money or counterfeiting than that in fact increase their net supply of debt and increase the amount of money in the system in the shadow banking system but then they use that as justification to print more money to presumably help these insolvent banks so. still at this late stage of the game even though the insolvent banks have proven to be money launderers for laundering money for terrorists funding terrorism funding mexican drug cartels rigging lie bar rigging gold into and walda mis selling involved in criminal activity j.p. morgan goldman sachs barclays h.s.b.c. the fed still protects them it's still a protection racket your thoughts all that's right but the crooks run the fair don't they and they run the treasury is the same executives who calls the financial crisis that the run the treasury records are indices and him and the drought across is their project dr roberts just prior to the smashing gold prices by mc of sorts

on a legal a short selling the fed accidentally released minutes which signaled a major change of policy the minute suggest the fed may possibly wind down quantitative easing what do you think of this dr roberts i don't see how they can do it because if they do unwind it. what happened when france is the one with a one trillion dollar federal budget deficit and if they do one wind it what supports the bond crisis one whole reason for quantitative easing is to drive up the prices of the debt related to root it was all the banks too big to fail books and so they're trapped if they if they stop quantitative easing and they're not supporting bond prices that interest rates will rot us and the the shall see the banks worsen will cause the prices of their assets in the bank's

books world class. course if interest rates rose and the bond market collapses stuck organ collapses so i don't believe we're on what. qualitative easing i don't know how they'll get out of it now i'm not exactly clear on the dates but were you in the reagan administration during the plaza accord because i believe that was the last time international country and i got together internationally to reset global exchange rates after the kind of the post bretton woods era the plaza court came in the mid eighty's they had to readjust the parameters on the global for extracting and the the currency grid i think that was the last major time they did that so in my here's my statement there's not going to be an on winding of quantitative easing but there will be some new international conference to figure out how to readjust the global currency grid in one fell

swoop your thoughts i think the players are cool during reagan's second term. jim baker who moved from. she was staring the white house to treasury and then i was out. i don't know if there will be another agreement i think what's happening is individual countries are making their own agreements to simply avoid the use of the dollar as it is international payment you know the brics. all are making the reman to settle their trade in their own currencies and recently it was announced that australia has made this agreement with china they're not going to convert their currencies into dollars and back out all japan and china are working on the same kind of very big so it looks to me more like a move away from the use of the reserve currency at least for countries whose

current says all are stable certainly more stable the law. so i don't know that there will be another agreement don't quite see how they can. real. both the federal reserve bank of japan and apparently also your putin people are emitted to turning money and war into the. various kinds of bailout schemes now i don't know if he's saw this or not but just before they smash and gold coordinated by central banks the price of gold in yen at actually had a forty year high so here you had massive money printing in japan a new forty year high in gold and that was that was tipping people's hand that there that this money printing policy was in fact potentially hyperinflationary i

don't know if you saw that particular action on the markets if you could comment on that and a secondarily this accidental release of fed minutes to insiders we've seen and also we also understand that the rule the stock act stop trading on insider knowledge act between washington and wall street has expired so that in fact traders and congressmen can trade out inside information you are in washington they're openly releasing data ahead of market moving points and they're trading on it and they're just they're just stealing money from the population isn't this kind of them a new high watermark for corruption in america or are you you know states government knows probably. well the most corrupt in the world if not the most corrupt. literally everything that is said is

a lie done just about economic policy and the rules are also in the right everything that warrants a foreign policy in the recent table league table that describes the countries around the world in terms of corruption america is no longer in the top twenty in terms of the least corrupt they are dropping precipitously down that scale they're becoming one of the most corrupt countries in the world and this bernanke and the fed in washington are demonstrating exactly what it's like basically argentina we saw during their collapse america same to be mimicking that pretty closely now let's turn to your book for a second the failure of laws a fair capitalism explain how and why it has failed george let me just run through the book because the failure or less affair is just part of it all the books it's very partial what the first part does is it examines failures in economics their problems in an economic theory such as the economists who confuse labor arbitrage

with free trade and sat and shared while middle class jobs were moved out of the country leaving us with a you. trade deficit with. devastated middle class. so the first part deals with those kinds of problems a second are shows what is happening to the american labor force it in effect has been turned into a third world labor force where the only available jobs are and lowly paid the best services so that they can affect. the new economy is to have to and undeveloped very rural economy and the third part deals with the current. sukkot sovereign debt crisis in europe and shows that it's being used to establish. two things one that the public must bear the cost

of mistakes made by private banks and the other use of the so-called crisis is to take away the sovereignty of the individual countries by turning their budget and tax policy over to to the e.u. so that's what the book does it walks you through basically the failure of economics the failure of all of the apologists for the failure policies now what happened with while it did i use the failure of laissez faire capitalism well if you look back over the last quarter century it's been a century of massive deregulation and massive proposition you know that your. privatized evening deregulated so did the french and of course here it was

extraordinary particularly in the financial region they simply totally degraded late. all american finesse that they repealed and less to go at so that commercial banking is now lumped together with investment banking. and they took the position i'm in saw speculators speculators can dominate commodity markets they got rid of. all constraints and debt leverage and what happened we didn't get libertarian nirvana and we got crony capitalism that they forgot that private power is it can be just as abusive as public well and now while this is going on dr roberts the stock market setting new all time highs that of course the majority of the media will point to that as proof of success what are they going wrong. yes well. it's rigged to is that what the banks

do all the lovely bed fellows until. they buy stock futures how can you have a stock market at all times. when considering becomes a flooding when the labor force participation rate is collapsing because there's no jobs would retail sales of the cloudy or that what is the basis for this market and we've had these amazing collapses should we had won the beginning of this century we had a lot of weight and there's one no period it's just. what sets it all all right well we're going to leave it there dr paul craig roberts thanks so much for being on the kaiser report. maybe merc's all right and that's going to do it for this edition of the kaiser report with me max kaiser and stacy herbert my guest paul craig roberts his web site is paul craig roberts dot org if you'd like

to send us an e-mail please do so at kaiser reported r t t v dot argue until next time x. guys are saying buy off. choose your language. for the week over though if. someone. chooses but the consensus. seems to be opinions that immigrate to. choose the stories but if you. choose access to often. no way things are going to republican. better off when the state of. texas has got

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